29% of small businesses in America fail due to running out of cash.

Unfortunately, most entrepreneurs don’t know how to leverage credit to save their businesses from this fate. They don’t know the types of business loans available and how to apply for them. That’s why when facing capital problems, they struggle to decide the specific business loan to apply for.

So, as a savvy business person, you must learn how to overcome this obstacle.

To help you out, here are the different types of business loans that exist today.

Business Lines of Credit

Despite your small business reporting profits, there may be times when you struggle to meet your short-term expenses. The reason is that you’re yet to receive payments from your debtors, and that’s why you’re facing cash flow problems. So, to overcome these financial struggles, review various short-term business funding options.

One of these options is a business line of credit that allows you to access funds quickly for short-term obligations. It works like a credit card where you can access funds up to a certain limit. Therefore, the business line of credit enhances business flexibility as it helps you overcome cash flow problems.

SBA Loans

As a new small business owner, it’s an uphill task to apply for loans from commercial banks. Your business is yet to build a credit score, and you don’t have any valuable assets that you can use as collateral. You need to get a guarantor to overcome these struggles, so where do you find one?

The answer is applying for SBA loans, as the government guarantees them. These loans are designed to make it easy for small and medium enterprises to access credit.

Personal Loans for Business Purposes

Most entrepreneurs tend to use personal loans for expansion to enhance business growth. Some take a second mortgage and invest the money in their small businesses. Others borrow money from friends and relatives to acquire crucial business equipment.

Although this helps raise funds, it’s not the right path to entrepreneurial success. The reason is that you need to separate personal and business finances. That’s why you need to learn ways to build your business’s credit score to allow it to borrow money independently.

Business Term Loans

If your business is seeking a lump sum of cash to repay over a long period, go for term loans. These loans are great when purchasing fixed assets such as business buildings and equipment. The objective is to spread the loan amount over a long period, thereby lowering the monthly installments.

Know About Different Types of Business Loans to Pick the Right One

To simplify accessing funding, you need to learn about the different types of business loans that exist. The idea is to know when it’s best to choose a given type of loan. For example, for short-term expenses, go for a business line of credit, whereas for a long-term need, choose a term loan.

Please see our other blog posts for more amazing Business growth tips.